Ruminator Books must raise $500,000 by Jan. 31 or close its doors and surrender its assets to Macalester College. The deadline for the independent bookstore was set by Macalester, Ruminator’s 33-year partner and largest creditor, after debts to the school exceeded $600,000 in September.

Ruminator’s plan to raise the money hinges on a public offering of stock. Shares of stock will be sold for $1 per share, with a minimum purchase of 250 shares.

According to the disclosure document, Ruminator Books had $589,000 in loans outstanding and $92,000 in past due rent owed to Macalester as of Aug. 31.

A History of Debt

“This was a great bookstore, one of the best in the country … and now it’s not,” said founder and CEO of Ruminator Books David Unowsky.

Unowsky opened the bookstore in 1970, then named The Hungry Mind, across the street from its current location on Grand Avenue. The bookstore changed its name in 2000 when Unowsky sold the rights for the original name to an Internet start-up business for an undisclosed sum of money.

Macalester’s textbook operation fell apart in 1972, said Unowsky. Posting minimal notice, the textbook company Macalester contracted closed down, leaving the school without the means to fill orders for student books.

At this time Ruminator Books approached Macalester and agreed to run its textbook sales, on the condition that the school provide a loan of $75,000. Upon agreement, Ruminator moved to the larger space across the street and expanded to textbooks sales, Unowsky said.

Textbook sales generated 29 percent of the total revenue for Ruminator in 2002, a gross intake of $850,000. Ruminator also hosted 225 author events that year.

These activities and the need for more sales room led Ruminator to expand to fill all available space within the Grand Avenue location that it had originally shared with two other tenants. But despite sales growth, Ruminator was never a profitable venture, Unowsky said. “As we expanded, so did our debt.”

By 2002, the debts totaled over a million dollars.

Unowsky said that the losses resulted from two unwise business moves. The first was a plan to open a separate, textbook-focused location for Macalester students in 1998, followed by a decision two years later to open another store in downtown Minneapolis. Both ventures failed. “I’m a man with ’70s business principles, living in the twenty-first century,” Unowsky said.

The Bottom Line

Ruminator cannot renegotiate the Jan. 31 deadline and must raise the $500,000. The deadline is an amendment to an Oct. 14 agreement with Macalester outlining the terms of debt repayment.

A May 2003 agreement required Ruminator to remain current on its rent to Macalester or face eviction.

Macalester also suspended its textbook contract with Ruminator Books for the fall of 2003 and the spring of 2004. Textbooks were ordered and sold by Macalester this fall although the college paid Ruminator staff to run the sales, Unowsky said. The location change was announced in an Aug. 22 e-mail to students, which said that Ruminator was in the process of experimenting with various marketing and operations improvements.

“As part of the tests, Macalester and Ruminator are evaluating the convenience of a separate textbook-focused location for Macalester’s students on campus,” the e-mail read. Students were not informed of the financial reasons behind the textbook change.

“We didn’t have the cash to buy the textbooks,” Unowsky said. Vendors were unwilling to ship more inventory to Ruminator because the store owed book vendors over $400,000 as of Oct. 4, according to the disclosure document, most of which was past due. The vendors were unwilling to ship more inventory to Ruminator, the document explains.

Ruminator Publishing Co., the book-printing arm of the Ruminator name, is releasing no new titles at the time because of the store’s financial problems. Ruminator Publishing is a separate corporation operating in the same rented space as Ruminator Books. It is not required to release financial information at this time.

However, according to the financial disclosure document, the publishing company owes Ruminator Books over $250,000. Unowsky and his wife Pearl Kilbride are attempting to sell both Ruminator Publishing and Ruminator Review, the quarterly publication published by Ruminator Books.

The Community Plan

If Ruminator reaches the $500,000 mark by the Jan. 31 deadline, the rest of the money is guaranteed by the U.S. Small Business Administration, which will grant Ruminator a maximum loan of $300,000 through Drake Bank in Minnesota.

But raising that money requires that at least 2,000 people purchase 250 shares of the stock through the public offering. Unowsky admitted that the offer is not tempting. In the financial disclosure document, Ruminator states, “We have a history of losses, expect future losses, and may not achieve or maintain profitability.”

“Do not give us your money if you expect a return,” Unowsky warned concerned members of the college at a Dec. 3 meeting of Macalester faculty and staff. The college has maintained that its primary concern is the future of its community partner.

“There’s been this longstanding mutually beneficial relationship,” Macalester Treasurer David Wheaton said. “The college benefits from the more than 200 annual author events Ruminator hosts.”

As for the financial situation, “we’d been aware of it all along,” Wheaton said. Although he admitted to knowing very little about the underlying operations of the store, Wheaton noted the value of having a community partner who is also an independent businessman. “We let him do his own thing. He runs his business, and we are a player,” he said.

For Ruminator employee and community contact Eve Marofsky, the key is to remember that the fight for Ruminator is not a “save us” campaign. “Our situation right now is an urgent one,” she said. But in the long run, “it’s not exciting, it’s about consciously choosing to support independent stores,” she said.

Although Ruminator has only raised $36,000, Marofsky admits that “things have picked up in the last few weeks.”

“We’re making connections as fast as we can,” she said.